After an eight-year run, the rate of U.S. bank failures has faded to a near-normal level. There were eight bank failures in 2015, and a similar number is expected next year. This does not mean the banking sector has returned to vibrant health. As a whole, banking remains overstaffed by about 20 percent, and the high overhead combined with an overhang of troubled loans from a decade ago still weighs on hundreds of banks. Regulators this month warned of a new wave of bank speculation in commercial real estate similar to the one a decade ago that led to most of the bank failures since. Artificially low interest rates, which the Fed plans to keep at crisis levels into 2017, also limit banks’ earning power. However, investor confidence has improved enough and the number of deeply troubled banks has declined enough that troubled banks will more often be rescued by private investors than by deposit insurance.
U.K. rules restricting bonuses fall short of European Union requirements by exempting hundreds of hedge funds, fund managers, brokers, and other institutions. The businesses that London sought to exclude from bonus-size restrictions are large by any ordinary understanding but were exempted for being “small” by City of London standards.
Higher One skimmed off $31 million in financial aid intended for college students between 2012 and 2014 through hidden fees on its financial aid debit cards. In a settlement with regulators, it has agreed to refund the improper fees and pay $4 million in penalties.
In a separate debit card settlement, The Bancorp Bank will pay $1 million in restitution and $3 million in penalties after it ignored the terms of private-label debit cards it issued. Despite a name dripping with modern irony, The Bancorp Bank is an old-style corporate institution with little connection to the management agility or information technology of the modern banking industry. In the settlement with regulators, it has agreed to implement modern accounting systems that will enable it to comply with its own contracts.
Hyatt this week disclosed a payment transaction data leak potentially affecting all customers of the hotel chain. The malware was initially discovered November 30 but was not disclosed until December 23. Hyatt has been able to learn very little so far about the nature and extent of the data leak.
As the quarter ends, U.S. credit card issuers have made only modest progress in issuing the chip-enabled credit cards that were supposed to have been released one quarter ago. Probably in one more quarter the credit card industry will be able to replace most current active credit cards with the new card style.